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Budget Deal Done, but is the Problem Solved?

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 By Jim Wishner/Steve Powers, Public News Service - MN, Contact
May 21, 2008

St. Paul, MN – Minnesota's legislative leaders and governor are talking up the results of the just-finished session, but the good feelings may not last long. They're hailing the new budget plan, approved just before the legislature adjourned late Sunday, for erasing a billion-dollar deficit without raising taxes.

Now, however, analysts are going through the fine print. Nan Madden, budget policy director for the Minnesota Council of Nonprofits, has been working on the Minnesota Budget Project. She says the new plan is, at best, only a short-term solution.

"This might be a good plan if we had a deficit just this year, but that's not our situation. We have projected deficits well into the future."

Madden believes policymakers missed a good opportunity to address the state's long-term finances. Instead, she says, their strategy uses up some reserves and saddles the state with an additional $50 million in debt, because Gov. Tim Pawlenty insisted the budget contain fewer revenue increases - and more tax cuts.

"This budget plan uses $500 million from the state's budget reserves on a one-time basis, but without really any plan for the future. The long-term solution is missing. We think they largely were unable to implement a real long-term solution because the governor had taken revenues off the table."

While the overall budget avoids some of the more painful potential consequences, Madden warns there still will be some downsides.

"The proposal diverts funds that were meant to help low-income families get and keep jobs, simply to fill in the deficit hole; and there are pretty significant cuts in higher education. We know those investments are important for the state's economic strength, as well. We're also concerned about some of the constraints put on local governments, and their ability to provide services in our local communities."

Not all lawmakers are pleased with the budget deal. A group of Senate Republicans is warning the budget relies too much on dipping into the reserve fund and not enough on spending cuts and predicting that, as a result, next year's state budget problems could be even worse.

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